A Chinese Telecom Firm Made an Excessive Bid to Create New 3G Cell Phones.

Huawei Technologies de Costa Rica, a Chinese telecommunications company in Costa Rica, was the only company to submit a bid for Costa Rican Electricity Institute’s (ICE’s) 3G cell phone service contract. Their bid, however, was 159% of the asking price, and has caused several problems and insinuations by ICE.

Costa Rica law allows for companies to run contests for their large projects – the best bid wins. In this case, ICE put together a wish list for a Costa Rican 3G (third generation) cell phone network which, among other things, allow for video chat and video conferencing. ICE’s package included 1.5 million 3G cell phone lines, 554 radio bases (cell towers), and 500,000 cell phones, to be used for both prepaid and monthly service plans. According to ICE’s calculations, the first 3G phones would be ready for the middle of 2009, and all construction and planning should be finished within 15 months of its start.

On July 24, Huawei Technologies and four other telecommunications companies — Ericsson de Costa Rica, ZTE Corporations, Nokia-Siemens Network Costa Rica, and Continex (Samsung) — sent a formal letter to ICE, objecting to the contract’s terms. The five technology firms alleged that ICE’s contract would be impossible to fulfill, according to the terms and requirements set by ICE.

The letter seemed to be a formal withdrawal from the contest by all parties. However, after the four other companies pulled out of the contract competition, Huawei Technologies submitted a bid for the project, fulfilling all of ICE’s requirements that it had earlier claimed to be impossibilities. The difficult contract, however, brought an expensive bid: at $583 million, Huawei Technologies’s price was 159% ($358 million) over ICE’s estimated cost.

Huawei Techonologies’s lone bid was disappointing for the telecommunications giant. “ICE was hoping that more [telecommunications] providers would pay closer attention. The other companies will have to explain their opinion, because they acted with a group of companies and wanted to change the contracts terms, as established by ICE,” ICE spokesperson, Elberth Druán Hidalgo, said.

Pedro Pablo Quirós Cortés, Executive President for ICE, believes that a group of companies is likely trying to block the project, waiting for American competition to arrive, courtesy of CAFTA. Because of these actions, ICE views Huawei Technologies’s bid as “normal,” responding to a market where the Chinese company is seen as the only option. However, “the authorized sum is $225 million. If, during the competition, an approved bid exceeds this amount by 10%, we can cover it, if it exceeds 10%, it will be necessary to get authorization from the Republic’s General Comptroller,” the competition’s rules stated.

Though the future is far from clear, ICE will likely reject Huawei Technologies’s bid because it is simply too costly. If not, though, interested customers can look forward to a cutting-edge, very expensive cell phone technology, debuting within the next 12 months.

This post's rating:

Related Stories

Filed under: Business on August 5th, 2008